TARGETING A NEGLECTED MARKET FOR FINANCIAL SERVICES: WOMEN

ABSTRACT

There is no arguing the fact that Women are special. Our Creator has made us

emotional and nurturing beings. These traits, our child-rearing function, our roles in

society as wives and mothers, and ultimately our mere gender introduce unique

challenges in the areas of money management and financial planning. Historically,

financial institutions and financial advisors have not invested in women’s initiatives;

they have failed to recognize the need to focus on women by seeking to understand

them, building the rapport that they require to gain their trust, educating them, and

dedicating them the attention they warrant to be advised and served effectively. In

the current economic turmoil, where there is a heightened urgency for financial

institutions to differentiate themselves in order to prevail, catering more specifically

to women might be a way for financial institutions and financial planners to sustain

their competitive advantage.

Keywords: women’s initiatives, competitive advantage

INTRODUCTION

This editorial looks at women as a neglected target market for financial

services and financial planning. Studies show that women have specific financial

needs associated with their gender and functions in society, and also have different

styles of communication in terms of learning and bonding with a trusted advisor; in

fact women have distinctive financial styles altogether, which few financial services

providers have recognized and addressed. This paper will look at statistics pulled

from varied resources confirming that women live significantly longer than men,

and that more women today enter the workforce than ever before, yet tend to earn

less than their male counterparts. Women are spenders and providers, and are as

much concerned with household short-term financial needs as they are with long-

term retirement needs. Women also have intermittent careers because of child-

raring, and their shorter overall time in the workplace translates into lesser pension

benefits. At the same time, women live longer and therefore inherit more wealth. It

is no surprise, then, that a report by The Boston Consulting Group (2010) described

women as “an increasingly wealthy and independent group” (Damisch, Kumar,

Zakrzewski, and Zhiglinskaya, p. 1). In light of women entrepreneurs and

professionals gaining an increasing share of the market place and controlling an

evermore significant percentage of global wealth, the need to tailor financial

planning and services to women could not be any more apropos. Some financial

services providers, like The Bank of Tampa, have become aware of the underserved

female professional clientele and started successful women’s initiatives.

STATISTICS SAY IT ALL

DEMOGRAPHICS ~ CERTIFIED FINANCIAL PLANNER™ Blayney (2010)

beautifully summed up “hard biological and social realities” that justify the need for

a woman-centered financial planning approach (p. 49):

- Women outlive men by five to seven years

Some sources even estimated that about 40% of women who turned 50 in

2010 would live to be 100 (Nguyen, 2010, para. 2).

- Women are caretakers for their children and often times elderly relatives

- There is a 20 to 25% income gap between men and women

- Women spend fewer years in the workplace—average of 27 vs. 40 for men

- The widowhood average age in the United States is 56. Spousal death and

divorce make it more likely for women to end up on their own

ECONOMICS ~ A recent study by The Boston Consulting Group (BCG), which

surveyed five hundred women with at least $250,000 in assets under management,

revealed that women currently account for approximately 27% of the world’s

wealth, with two thirds of it being attributed to North America and Western Europe

(Damisch et al, 2010, p. 1). Whereas years 2004 to 2009 saw a 7% annual growth

rate in the amount of women-controlled wealth, 2009 to 2014 will likely average

8%; the wealth-management-by-women trend is not going away (p. 2). In a world

where women’s dominion over wealth is creeping up, financial services providers’

focus on serving women can only benefit them and add value to their institutions as

a whole.

Another comprehensive survey by BCG exposed the increasing number of

women in the global workforce, from 1 billion in late 2009 to a projected 1.2 billion

by the end of 2014, as well as women getting more educated and making up 57% of

undergraduate and 59% of graduate students in the United States (Silverstein, Kato,

and Tischhauser, 2009, p. 1). On this topic, the Institute for Women and Wealth

reported that women had at least 50% ownership in $10.6 million U.S. firms

generating $2.6 trillion in sales in 2004, and that each decade since the 1950s has

seen an increase in women’s educational levels (Damen, 2011). These trends

contribute to women being major players in 21st century’s economic growth, as also

highlighted in Blayney’s (2010) article. Blayney shared statistics from various

census sources, the most astounding one being that “women are expected to control

60 percent of the wealth in the United States within the next decade” (p. 49). As

women achieve higher earnings and greater wealth, they are becoming more

involved in the management of household finances. What does all of this tell the

savvy financial services provider? There is an untapped opportunity in

“empowering, educating and engaging women clients” (Blayney, p. 48).

SURVEY RESULTS: WOMEN WANT MORE IN FINANCIAL SERVICES

More than 70% of BCG survey respondents felt that wealth management

services should be tailored to women, and 55% indicated that wealth managers fell

short of meeting the needs of women (Damisch et al, 2010, p. 1, 4). The consensus

amongst the women surveyed was that wealth managers did not give them the same

attention and quality of advice as provided to men, interacting with them based on

preconceptions about females such as their risk aversion and lack of proficiency

with finances. Evidently, there is a widespread perception amongst women of an

“uneven playing field” in the financial services area— as in many others, a general

sense of women being patronized and treated as subordinates in their interactions

with wealth managers (p. 3).

The reality, I contend, is that there are three main ingredients that financial

services providers should incorporate in a women-centric recipe: (1) the current

general dissatisfaction experienced by women—which needs to be whipped into

contentment; (2) the financial evolution of women, who are becoming more and

more wealthy—whether it be from higher academic achievements and successful

entrepreneurship or from funds inherited from deceased or divorced husbands; (3)

the ongoing issues unique to women, such as the financial stress introduced by

marriage, divorce, childbirth, or widowhood.

Truly, regardless of how wealthy women are, all women would benefit from

acquiring knowledge on managing finances. Too often, women find themselves in

Lynn Brook’s shoes, who realized “when she sought help from a financial adviser

after her husband died [that] they might as well have been speaking different

languages”(Kapadia, 2010, para. 1). As a banker, I have dealt with women in

similarly overwhelming situations because their deceased husbands had handled all

of the finances. These women felt lost and helpless, and although I could give them a

hand from that point on, they would have been in a much better place had they

participated in or had a basic understanding of their financial wherewithal.

Moreover, as women gain wealth, they are likely to become more involved in

financial decisions altogether and demand the attention they deserve from financial

experts.

Women’s attributes and place in society introduce financial challenges.

Consider that the professional woman typically has to juggle a taxing work schedule

while raising children –with or without a husband— and managing the household.

On top of short-term budgeting needs for daily expenses, she has to plan for

retirement, as she is likely to live longer, and therefore have higher medical

expenses and long-term care needs. To complicate the retirement planning process,

work interruptions from pregnancy and child-raring often result in insufficient

accrual of funds in a pension plan.

Studies haves shown that women look for a holistic approach in terms of

investment advice, considering wealth as a “means of life planning rather than a goal

in itself” (Damisch et al, 2010, p. 6). They want clear and to-the-point counsel to

achieve their goals, and it is essential that the advice be delivered in an empathetic

manner, because women are intrinsic emotional beings. Above all, women seek

financial relationships with trusted advisors who should have a genuine interest in

learning and understanding their needs, take the time to listen to them, and

ultimately provide them with customized advice and suitable solutions. Women are

also interested in expanding their financial knowledge, and they enjoy learning in

community settings such as seminars.

CAPITALIZE ON CATERING TO WOMEN!

Indeed, professional women constitute a market niche for financial services

providers. Sumangali (2011), a Mastercard Worldwide Insights group Analyst, talks

about the need for financial institutions to “understand their current customers,

segment their portfolios, and develop ways to deepen and expand existing

relationships.” He calls women “the best target for banks that are serious about

relationship banking,” since women make up half of the population and “ninety-five

percent of women are financial decision makers in their household (p. 1).” BCG’s

managing directors concluded in their Women Want More 2009 article that “the

female economy represents the largest emerging pool of wealth on the horizon.”

(Silverstein et al, 2009, p. 4). That in itself justifies financial institutions’ tremendous

opportunity in catering to women.

Before implementing a women outreach program, however, a company must

first and foremost recognize that women view money in a different light than men,

and be open-minded to learning more about the female psyche and innate

behavioral tendencies, which influence their financial style. For example, in regards

to investments, behavioral finance experts have established that women tend to

value safety rather than gain, whereas men, more than anything else, want to win

and therefore worry more about the fast appreciation of their stock portfolio. Men

are much more competitive and typically willing to take more risk with their

investment choices to achieve higher returns. Another notable difference between

female and male behavior is the tendency for women to react to disconcerting

events such as natural disasters, terrorist attacks, or economic crises with fear

rather than anger.

Furthermore, women and men largely differ in communication styles.

Blayney (2010) covered that aspect well. She explained that women generally have

a collaborative conversational style, whereby they seek to build relationships with

their peers based on identified commonalities with others. Men, on the other hand,

communicate “in terms of hierarchy and rank” (p. 50). Wall Street Journal finance

columnist Zweig (2009) describes men’s emphasis on dominance perfectly in his

blunt statement that “in the testosterone-poisoned sandbox of the male investor, the

most important thing is beating somebody else; the second most important,

bragging about it” (p. 163). Clearly, men and women are wired differently. More

often than not, advisors make assumptions about women based on generalizations

rather than having a conversation with them in order to determine what

communication style is most effective for them, and what their risk tolerance and

household challenges are to tailor the discussion specifically for them.

Once a company is fully aware of what makes women-clients tick, it can

incorporate differentiating efforts in a women’s initiative to effectively engage and

empower women.

THE BANK OF TAMPA: WOMEN CONNECTED INITIATIVE

A few financial institutions have been on the avant-garde of women’s

initiatives and followed BCG’s advice to “seize early-mover advantage by developing

highly targeted products and services, providing education and resources, and

focusing their marketing efforts to reach out to women” (Silvertein et al, 2009, p. 4,

5). The Bank of Tampa is one of them.

In 2009, a small women committee was formed at The Bank of Tampa to

study the differences between men and women business owners and professionals

amongst clients and in the community. While The Bank of Tampa has had strong ties

in the Tampa Bay community for twenty-seven years and has been very successful

with servicing the financial needs of local professionals and owner-managed

businesses, as most financial institutions, it had reached out to all clients and

prospects in the same manner until then. Just two years ago, the bank began to

recognize that targeting women separately from its general approach might be more

effective.

At the onset of its women-centric approach, the bank focused on the key

question of what it could do to foster women professionals and small business

owners’ success. In an effort to gain a better understanding of the unique challenges

that these women faced, focus group luncheons were scheduled, gathering no more

than a dozen of professional women at a time—current clients as well as

prospects—to have intimate conversations about their business and banking

experiences. These luncheons allowed bankers to pinpoint women clients’ concerns

and preferences while giving them the opportunity to network (guests were

strategically selected to promote business connections). The gatherings took place

in one of the bank’s well-lit and elegant boardrooms, and the catering company

providing the food was a client of the bank. The women enjoyed meeting in the

quaint setting and felt comfortable speaking up. Bankers learned that women

professionals valued long-term business relationships. They learned that women

professionals preferred to socialize and network at lunchtime rather than over

breakfast or at after-hour events because of family constraints. The topic of

education on financial matters came up. Guests suggested that the bank could

improve its women outreach by hosting “Lunch n’ Learns” featuring guest speakers

to educate them on different topics of interest—financial or related to their

businesses.

The focus groups also brought out women’s philanthropic aspirations. Guests

asked that the bank introduce them to local non-profit organizations for

volunteering opportunities. There were even talks of bankers and women clients

partnering up in volunteer activities.

The Bank of Tampa has gained insight into how to better cater to its women

professional clients and continues to host women-focused events. It has dedicated a

section to Women Connected on its website, which highlights its purpose to “provide

women clients and partners with opportunities to connect and learn in an

environment that is most comfortable and suitable to them”

(http://www.bankoftampa.com/women-connected.aspx). The website also displays

resources for women business owners and professionals, providing links to

organizations that specifically support women, such as the American Society of

Women Accountants, the Greater Tampa Chamber of Commerce Women of

Influence Luncheons, and United Way of Tampa Bay Women’s Leadership.

CONCLUSION

Blayney (2010) is right on point with her metaphor on the financial planning

industry’s need to “’get [women] in the room’ to start talking about money” (p. 50).

Women have distinctive attributes that should not be ignored. Women wish to be

engaged with their advisors; they want and need to become more knowledgeable in

finance, but it is important that their sense of community be preserved in the

learning process. Understanding women’s communication style is essential in

gaining their respect as a trusted advisor. Life issues specific to women also require

financial services providers to tailor their advice to women by focusing on different

areas, such as helping women with household administration and teaching them

about budgeting, savings, and long-term financial planning. BCG reported in 2009

that women controlled $20 trillion of consumer spending, which could increase to

$28 trillion over the next five years, and had total earnings of $12 trillion, expected

to grow to $18 trillion (Silverstein et al, p. 4). It is time for women to be empowered

by their financial services providers!

While many financial institutions have failed since 2008 and many more are

expected to fold in the years ahead, The Bank of Tampa is still profitable and

growing thanks to its clever and conservative business practices of building long-

lasting relationships with men AND women in the community “one client at a time”

(Divers, 2011, p. 7). Financial-services companies have a lot to gain from better

serving women; it is a shame that women-targeted approaches are often a forgotten

tool in financial institutions’ shed to sustained competitive advantage.

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